59056 Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations
1 An institution’s risk-based assessment rate may
change during a quarter when a new CAMELS
rating is transmitted, or a new long-term debt-issuer
rating is assigned. 12 CFR 327.4(f). For purposes of
calculating an institution’s prepaid assessment, the
FDIC will use the institution’s CAMELS ratings and,
where applicable, long-term debt-issuer ratings, and
the resulting assessment rate in effect on September
30, 2009.
2 74 FR 51063 (Oct. 2, 2009).
opt in when deciding whether to pay
overdrafts for checks, ACH transactions, or
other types of transactions.
Paragraph 17(b)(3)—Same Account Terms,
Conditions, and Features
1. Variations in terms, conditions, or
features. A financial institution may not vary
the terms, conditions, or features of an
account provided to a consumer who does
not affirmatively consent to the payment of
ATM or one-time debit card transactions
pursuant to the institution’s overdraft
service. This includes, but is not limited to:
i. Interest rates paid and fees assessed;
ii. The type of ATM or debit card provided
to the consumer. For instance, an institution
may not provide consumers who do not opt
in a PIN-only card while providing a debit
card with both PIN and signature-debit
functionality to consumers who opt in;
iii. Minimum balance requirements; or
iv. Account features such as on-line bill
payment services.
2. Limited-feature bank accounts. Section
205.17(b)(3) does not prohibit institutions
from offering deposit account products with
limited features, provided that a consumer is
not required to open such an account because
the consumer did not opt in (see comment
17(b)(3)–2). For example, § 205.17(b)(3) does
not prohibit an institution from offering a
checking account designed to comply with
state basic banking laws, or designed for
consumers who are not eligible for a
checking account because of their credit or
checking account history, which may include
features limiting the payment of overdrafts.
However, a consumer who applies, and is
otherwise eligible, for a full-service or other
particular deposit account product may not
be provided instead with the account with
more limited features because the consumer
has declined to opt in.
Paragraph 17(b)(4)—Exception to the Notice
and Opt-In Requirement
1. Account-by-account exception. If a
financial institution has a policy and practice
of declining to authorize and pay any ATM
or one-time debit card transactions with
respect to one type of deposit account offered
by the institution, when the institution has
a reasonable belief at the time of the
authorization request that the consumer does
not have sufficient funds available to cover
the transaction, that account is not subject to
§ 205.17(b)(1), even if other accounts that the
institution offers are subject to the rule. For
example, if the institution offers three types
of checking accounts, and the institution has
such a policy and practice with respect to
only one of the three types of accounts, that
one type of account is not subject to the
notice requirement. However, the other two
types of accounts offered by the institution
remain subject to the notice requirement.
17(c) Timing
1. Early compliance. A financial institution
may provide the notice required by
§ 205(b)(1)(i) and obtain the consumer’s
affirmative consent to the financial
institution’s overdraft service for ATM and
one-time debit card transactions prior to July
1, 2010, provided that the financial
institution complies with all of the
requirements of this section.
2. Permitted fees or charges. Fees or
charges for ATM and one-time debit card
overdrafts may be assessed only for
overdrafts paid by the institution on or after
the date the financial institution receives the
consumer’s affirmative consent to the
institution’s overdraft service.
17(d) Content and Format
1. Overdraft service. The description of the
institution’s overdraft service should indicate
that the consumer has the right to
affirmatively consent, or opt into payment of
overdrafts for ATM and one-time debit card
transactions. The description should also
disclose the institution’s policies regarding
the payment of overdrafts for other
transactions, including checks, ACH
transactions, and automatic bill payments,
provided that this content is not more
prominent than the description of the
consumer’s right to opt into payment of
overdrafts for ATM and one-time debit card
transactions. As applicable, the institution
also should indicate that it pays overdrafts at
its discretion, and should briefly explain that
if the institution does not authorize and pay
an overdraft, it may decline the transaction.
2. Maximum fee. If the amount of a fee may
vary from transaction to transaction, the
financial institution may indicate that the
consumer may be assessed a fee ‘‘up to’’ the
maximum fee. The financial institution must
disclose all applicable overdraft fees,
including but not limited to:
i. Per item or per transaction fees;
ii. Daily overdraft fees;
iii. Sustained overdraft fees, where fees are
assessed when the consumer has not repaid
the amount of the overdraft after some period
of time (for example, if an account remains
overdrawn for five or more business days); or
iv. Negative balance fees.
17(f) Continuing Right To Opt-In or To
Revoke the Opt-In
1. Fees or charges for overdrafts incurred
prior to revocation. Section 205.17(f)(1)
provides that a consumer may revoke his or
her prior consent at any time. If a consumer
does so, this provision does not require the
financial institution to waive or reverse any
overdraft fees assessed on the consumer’s
account prior to the institution’s
implementation of the consumer’s revocation
request.
17(g) Duration of Opt-In.
1. Termination of overdraft service. A
financial institution may, for example,
terminate the overdraft service when the
consumer makes excessive use of the service.
* * * * *
By order of the Board of Governors of the
Federal Reserve System, November 10, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9–27474 Filed 11–16–09; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AD51
Prepaid Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The FDIC is amending its
regulations requiring insured
institutions to prepay their estimated
quarterly risk-based assessments for the
fourth quarter of 2009, and for all of
2010, 2011, and 2012. The prepaid
assessment for these periods will be
collected on December 30, 2009, along
with each institution’s regular quarterly
risk-based deposit insurance assessment
for the third quarter of 2009. For
purposes of estimating an institution’s
assessments for the fourth quarter of
2009, and for all of 2010, 2011, and
2012, and calculating the amount that
an institution will prepay on December
30, 2009, the institution’s assessment
rate will be its total base assessment rate
in effect on September 30, 2009.1 On
September 29, 2009, the FDIC increased
annual assessment rates uniformly by 3
basis points beginning in 2011.2 As a
result, an institution’s total base
assessment rate for purposes of
estimating an institution’s assessment
for 2011 and 2012 will be increased by
an annualized 3 basis points beginning
in 2011. Again for purposes of
calculating the amount that an
institution will prepay on December 30,
2009, an institution’s third quarter 2009
assessment base will be increased
quarterly at a 5 percent annual growth
rate through the end of 2012. The FDIC
will begin to draw down an institution’s
prepaid assessments on March 30, 2010,
representing payment for the regular
quarterly risk-based assessment for the
fourth quarter of 2009.
DATES: Effective Date: November 17,
2009.
FOR FURTHER INFORMATION CONTACT:
Robert C. Oshinsky, Senior Financial
Economist, Division of Insurance and
Research, (202) 898–3813; Donna
Saulnier, Manager, Assessment Policy
Section, Division of Finance (703) 562–
VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\17NOR1.SGM 17NOR1
jlentini on DSKJ8SOYB1PROD with RULES
1 An institution’s risk-based assessment rate may
change during a quarter when a new CAMELS
rating is transmitted, or a new long-term debt-issuer
rating is assigned. 12 CFR 327.4(f). For purposes of
calculating an institution’s prepaid assessment, the
FDIC will use the institution’s CAMELS ratings and,
where applicable, long-term debt-issuer ratings, and
the resulting assessment rate in effect on September
30, 2009.
2 74 FR 51063 (Oct. 2, 2009).
opt in when deciding whether to pay
overdrafts for checks, ACH transactions, or
other types of transactions.
Paragraph 17(b)(3)—Same Account Terms,
Conditions, and Features
1. Variations in terms, conditions, or
features. A financial institution may not vary
the terms, conditions, or features of an
account provided to a consumer who does
not affirmatively consent to the payment of
ATM or one-time debit card transactions
pursuant to the institution’s overdraft
service. This includes, but is not limited to:
i. Interest rates paid and fees assessed;
ii. The type of ATM or debit card provided
to the consumer. For instance, an institution
may not provide consumers who do not opt
in a PIN-only card while providing a debit
card with both PIN and signature-debit
functionality to consumers who opt in;
iii. Minimum balance requirements; or
iv. Account features such as on-line bill
payment services.
2. Limited-feature bank accounts. Section
205.17(b)(3) does not prohibit institutions
from offering deposit account products with
limited features, provided that a consumer is
not required to open such an account because
the consumer did not opt in (see comment
17(b)(3)–2). For example, § 205.17(b)(3) does
not prohibit an institution from offering a
checking account designed to comply with
state basic banking laws, or designed for
consumers who are not eligible for a
checking account because of their credit or
checking account history, which may include
features limiting the payment of overdrafts.
However, a consumer who applies, and is
otherwise eligible, for a full-service or other
particular deposit account product may not
be provided instead with the account with
more limited features because the consumer
has declined to opt in.
Paragraph 17(b)(4)—Exception to the Notice
and Opt-In Requirement
1. Account-by-account exception. If a
financial institution has a policy and practice
of declining to authorize and pay any ATM
or one-time debit card transactions with
respect to one type of deposit account offered
by the institution, when the institution has
a reasonable belief at the time of the
authorization request that the consumer does
not have sufficient funds available to cover
the transaction, that account is not subject to
§ 205.17(b)(1), even if other accounts that the
institution offers are subject to the rule. For
example, if the institution offers three types
of checking accounts, and the institution has
such a policy and practice with respect to
only one of the three types of accounts, that
one type of account is not subject to the
notice requirement. However, the other two
types of accounts offered by the institution
remain subject to the notice requirement.
17(c) Timing
1. Early compliance. A financial institution
may provide the notice required by
§ 205(b)(1)(i) and obtain the consumer’s
affirmative consent to the financial
institution’s overdraft service for ATM and
one-time debit card transactions prior to July
1, 2010, provided that the financial
institution complies with all of the
requirements of this section.
2. Permitted fees or charges. Fees or
charges for ATM and one-time debit card
overdrafts may be assessed only for
overdrafts paid by the institution on or after
the date the financial institution receives the
consumer’s affirmative consent to the
institution’s overdraft service.
17(d) Content and Format
1. Overdraft service. The description of the
institution’s overdraft service should indicate
that the consumer has the right to
affirmatively consent, or opt into payment of
overdrafts for ATM and one-time debit card
transactions. The description should also
disclose the institution’s policies regarding
the payment of overdrafts for other
transactions, including checks, ACH
transactions, and automatic bill payments,
provided that this content is not more
prominent than the description of the
consumer’s right to opt into payment of
overdrafts for ATM and one-time debit card
transactions. As applicable, the institution
also should indicate that it pays overdrafts at
its discretion, and should briefly explain that
if the institution does not authorize and pay
an overdraft, it may decline the transaction.
2. Maximum fee. If the amount of a fee may
vary from transaction to transaction, the
financial institution may indicate that the
consumer may be assessed a fee ‘‘up to’’ the
maximum fee. The financial institution must
disclose all applicable overdraft fees,
including but not limited to:
i. Per item or per transaction fees;
ii. Daily overdraft fees;
iii. Sustained overdraft fees, where fees are
assessed when the consumer has not repaid
the amount of the overdraft after some period
of time (for example, if an account remains
overdrawn for five or more business days); or
iv. Negative balance fees.
17(f) Continuing Right To Opt-In or To
Revoke the Opt-In
1. Fees or charges for overdrafts incurred
prior to revocation. Section 205.17(f)(1)
provides that a consumer may revoke his or
her prior consent at any time. If a consumer
does so, this provision does not require the
financial institution to waive or reverse any
overdraft fees assessed on the consumer’s
account prior to the institution’s
implementation of the consumer’s revocation
request.
17(g) Duration of Opt-In.
1. Termination of overdraft service. A
financial institution may, for example,
terminate the overdraft service when the
consumer makes excessive use of the service.
* * * * *
By order of the Board of Governors of the
Federal Reserve System, November 10, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9–27474 Filed 11–16–09; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AD51
Prepaid Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The FDIC is amending its
regulations requiring insured
institutions to prepay their estimated
quarterly risk-based assessments for the
fourth quarter of 2009, and for all of
2010, 2011, and 2012. The prepaid
assessment for these periods will be
collected on December 30, 2009, along
with each institution’s regular quarterly
risk-based deposit insurance assessment
for the third quarter of 2009. For
purposes of estimating an institution’s
assessments for the fourth quarter of
2009, and for all of 2010, 2011, and
2012, and calculating the amount that
an institution will prepay on December
30, 2009, the institution’s assessment
rate will be its total base assessment rate
in effect on September 30, 2009.1 On
September 29, 2009, the FDIC increased
annual assessment rates uniformly by 3
basis points beginning in 2011.2 As a
result, an institution’s total base
assessment rate for purposes of
estimating an institution’s assessment
for 2011 and 2012 will be increased by
an annualized 3 basis points beginning
in 2011. Again for purposes of
calculating the amount that an
institution will prepay on December 30,
2009, an institution’s third quarter 2009
assessment base will be increased
quarterly at a 5 percent annual growth
rate through the end of 2012. The FDIC
will begin to draw down an institution’s
prepaid assessments on March 30, 2010,
representing payment for the regular
quarterly risk-based assessment for the
fourth quarter of 2009.
DATES: Effective Date: November 17,
2009.
FOR FURTHER INFORMATION CONTACT:
Robert C. Oshinsky, Senior Financial
Economist, Division of Insurance and
Research, (202) 898–3813; Donna
Saulnier, Manager, Assessment Policy
Section, Division of Finance (703) 562–
VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\17NOR1.SGM 17NOR1
jlentini on DSKJ8SOYB1PROD with RULES
59057Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations
3 74 FR 51063 (Oct. 2, 2009).
4 Section 7(b)(3)(E) of the Federal Deposit
Insurance Act (12 U.S.C. 1817(b)(3)(E)); Section
7(b)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1817(b)(2)).
5 74 FR 51063 (Oct. 2, 2009).
6 The requirement for imposing systemic risk
assessments is set forth at Section 13(c)(4)(G) of the
Federal Deposit Insurance Act (12 U.S.C.
1823(c)(4)(G)).
7 The regulations governing the FDIC’s risk-based
assessment system are set out at 12 CFR Part 327.
Those regulations give the FDIC the authority to
raise assessment rates by 3 basis points without
additional rulemaking. 12 CFR 327.10(c). On
September 29, 2009, the FDIC Board voted to use
this authority and adopted higher assessment rates
effective January 1, 2011.
8 74 FR 25639 (May 29, 2009).
6167; Scott Patterson, Senior Review
Examiner, Division of Supervision and
Consumer Protection, (202) 898–6953;
Christopher Bellotto, Counsel, Legal
Division, (202) 898–3801; Sheikha
Kapoor, Senior Attorney, Legal Division,
(202) 898–3960.
SUPPLEMENTARY INFORMATION:
I. Background
On September 29, 2009, the FDIC
adopted an Amended Restoration Plan
to allow the Deposit Insurance Fund
(Fund or DIF) to return to a reserve ratio
of 1.15 percent within eight years, as
mandated by statute. At the same time,
the FDIC adopted higher annual risk-
based assessment rates effective January
1, 2011.3
Liquidity Needs Projections
While the Amended Restoration Plan
and higher assessment rates address the
need to return the DIF reserve ratio to
1.15 percent, the FDIC must also
consider its need for cash to pay for
projected failures. In June 2008, before
the number of bank and thrift failures
began to rise significantly and the crisis
worsened, total assets held by the DIF
were approximately $55 billion and
consisted almost entirely of cash and
marketable securities (i.e., liquid assets).
As the crisis has unfolded, liquid assets
of the DIF have been used to protect
depositors of failed institutions and
have been exchanged for less liquid
claims against the assets of failed
institutions. As of September 30, 2009,
although total assets had increased to
almost $63 billion, cash and marketable
securities had fallen to approximately
$23 billion. The pace of resolutions
continues to put downward pressure on
cash balances. While most of the less
liquid assets in the DIF have value that
will eventually be converted to cash
when sold, the FDIC’s immediate need
is for more liquid assets to fund near-
term failures.
The FDIC’s projections of the Fund’s
liquidity include assumptions
concerning failed-institution resolution
strategies, such as the increasing use of
loss sharing—especially for larger
institutions—which reduce the FDIC’s
immediate cash outlays, as well as the
anticipated pace at which assets
obtained from failed institutions can be
sold. If the FDIC took no action under
its existing authority to increase its
liquidity, the FDIC’s projected liquidity
needs would exceed its liquid assets on
hand beginning in the first quarter of
2010. Through 2010 and 2011, liquidity
needs could significantly exceed liquid
assets on hand.
II. The Proposed Rule
On September 29, 2009, the FDIC,
using its statutory authority under
sections 7(b) and 7(c) of the FDI Act (12
U.S.C. 1817(b)–(c)), adopted a notice of
proposed rulemaking with request for
comment to amend its assessment
regulations to require all institutions to
prepay, on December 30, 2009, their
estimated risk-based assessments for the
fourth quarter of 2009, and for all of
2010, 2011, and 2012, at the same time
that institutions pay their regular
quarterly deposit insurance assessments
for the third quarter of 2009 (the
proposed rule or NPR).4 5 Under the
NPR, an institution would initially
account for the prepaid assessment as a
prepaid expense (an asset). The Fund
would initially account for the amount
collected as both an asset (cash) and an
offsetting liability (deferred revenue).
An institution’s quarterly risk-based
deposit insurance assessments thereafter
would be paid from the amount the
institution had prepaid until that
amount was exhausted or until
December 30, 2014, when any amount
remaining would be returned to the
institution.
Under the proposed rule, the FDIC
would exercise its supervisory
discretion to exempt an institution from
the prepayment requirement if the FDIC
determined that the prepayment would
adversely affect an institution’s safety
and soundness. In addition, an
institution could apply to the FDIC for
an exemption from the prepayment
requirement if the institution could
demonstrate that the prepayment would
significantly impair the institution’s
liquidity, or otherwise create significant
hardship.
III. Comments Received
The FDIC sought comments on every
aspect of the proposed rule, with six
particular issues posed. The FDIC
received more than 800 comments on
the proposed rule, of which
approximately 680 were form letters.
The comments are discussed in section
V below.
IV. Final Rule
In this rulemaking, the FDIC seeks to
address its upcoming liquidity needs by
amending its assessment regulations to
require insured institutions to prepay,
on December 30, 2009, their estimated
quarterly regular risk-based assessments
for the fourth quarter of 2009, and for
all of 2010, 2011, and 2012.
Legal Authority
The FDIC’s assessment authorities are
set forth in section 7 of the Federal
Deposit Insurance Act (FDI Act), 12
U.S.C. 1817(b) and (c).6 Generally, the
FDIC Board of Directors must establish,
by regulation, a risk-based assessment
system for insured depository
institutions. 12 U.S.C. 1817(b)(1)(A).7
Each insured depository institution is
required to pay its risk-based
assessment to the Corporation in such
manner and at such time or times as the
Board of Directors prescribes by
regulation. 12 U.S.C. 1817(c)(2)(B).
In addition, section 7(b)(5) of the FDI
Act, governing special assessments,
empowers the Corporation to impose
one or more special assessments on
insured depository institutions in an
amount determined by the Corporation
for any purpose that the Corporation
may deem necessary. 12 U.S.C.
1817(b)(5). The FDIC exercised this
authority earlier this year when it
promulgated a regulation imposing a
special assessment on June 30, 2009, of
5 basis points of an institution’s total
assets minus its Tier 1 capital as of that
date, not to exceed 10 basis points of the
institution’s risk-based assessment base
as of that date.8 Pursuant to that
rulemaking, the FDIC’s Board of
Directors may impose up to two
additional special assessments, each at
up to the same rate, at the end of the
third and fourth quarters of 2009,
without the need for additional notice-
and-comment rulemaking.
Instead of imposing any additional
special assessments while the industry
is in a weakened condition, the FDIC is
relying on its section 7 authorities to
require insured institutions to prepay
their estimated regular quarterly risk-
based assessments for the fourth quarter
of 2009, and for all of 2010, 2011, and
2012 (the ‘‘prepayment period’’).
Calculation of Estimated Prepaid
Assessment Amount
For purposes of estimating an
institution’s assessments for the
prepayment period and calculating the
VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 E:\FR\FM\17NOR1.SGM 17NOR1
jlentini on DSKJ8SOYB1PROD with RULES
3 74 FR 51063 (Oct. 2, 2009).
4 Section 7(b)(3)(E) of the Federal Deposit
Insurance Act (12 U.S.C. 1817(b)(3)(E)); Section
7(b)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1817(b)(2)).
5 74 FR 51063 (Oct. 2, 2009).
6 The requirement for imposing systemic risk
assessments is set forth at Section 13(c)(4)(G) of the
Federal Deposit Insurance Act (12 U.S.C.
1823(c)(4)(G)).
7 The regulations governing the FDIC’s risk-based
assessment system are set out at 12 CFR Part 327.
Those regulations give the FDIC the authority to
raise assessment rates by 3 basis points without
additional rulemaking. 12 CFR 327.10(c). On
September 29, 2009, the FDIC Board voted to use
this authority and adopted higher assessment rates
effective January 1, 2011.
8 74 FR 25639 (May 29, 2009).
6167; Scott Patterson, Senior Review
Examiner, Division of Supervision and
Consumer Protection, (202) 898–6953;
Christopher Bellotto, Counsel, Legal
Division, (202) 898–3801; Sheikha
Kapoor, Senior Attorney, Legal Division,
(202) 898–3960.
SUPPLEMENTARY INFORMATION:
I. Background
On September 29, 2009, the FDIC
adopted an Amended Restoration Plan
to allow the Deposit Insurance Fund
(Fund or DIF) to return to a reserve ratio
of 1.15 percent within eight years, as
mandated by statute. At the same time,
the FDIC adopted higher annual risk-
based assessment rates effective January
1, 2011.3
Liquidity Needs Projections
While the Amended Restoration Plan
and higher assessment rates address the
need to return the DIF reserve ratio to
1.15 percent, the FDIC must also
consider its need for cash to pay for
projected failures. In June 2008, before
the number of bank and thrift failures
began to rise significantly and the crisis
worsened, total assets held by the DIF
were approximately $55 billion and
consisted almost entirely of cash and
marketable securities (i.e., liquid assets).
As the crisis has unfolded, liquid assets
of the DIF have been used to protect
depositors of failed institutions and
have been exchanged for less liquid
claims against the assets of failed
institutions. As of September 30, 2009,
although total assets had increased to
almost $63 billion, cash and marketable
securities had fallen to approximately
$23 billion. The pace of resolutions
continues to put downward pressure on
cash balances. While most of the less
liquid assets in the DIF have value that
will eventually be converted to cash
when sold, the FDIC’s immediate need
is for more liquid assets to fund near-
term failures.
The FDIC’s projections of the Fund’s
liquidity include assumptions
concerning failed-institution resolution
strategies, such as the increasing use of
loss sharing—especially for larger
institutions—which reduce the FDIC’s
immediate cash outlays, as well as the
anticipated pace at which assets
obtained from failed institutions can be
sold. If the FDIC took no action under
its existing authority to increase its
liquidity, the FDIC’s projected liquidity
needs would exceed its liquid assets on
hand beginning in the first quarter of
2010. Through 2010 and 2011, liquidity
needs could significantly exceed liquid
assets on hand.
II. The Proposed Rule
On September 29, 2009, the FDIC,
using its statutory authority under
sections 7(b) and 7(c) of the FDI Act (12
U.S.C. 1817(b)–(c)), adopted a notice of
proposed rulemaking with request for
comment to amend its assessment
regulations to require all institutions to
prepay, on December 30, 2009, their
estimated risk-based assessments for the
fourth quarter of 2009, and for all of
2010, 2011, and 2012, at the same time
that institutions pay their regular
quarterly deposit insurance assessments
for the third quarter of 2009 (the
proposed rule or NPR).4 5 Under the
NPR, an institution would initially
account for the prepaid assessment as a
prepaid expense (an asset). The Fund
would initially account for the amount
collected as both an asset (cash) and an
offsetting liability (deferred revenue).
An institution’s quarterly risk-based
deposit insurance assessments thereafter
would be paid from the amount the
institution had prepaid until that
amount was exhausted or until
December 30, 2014, when any amount
remaining would be returned to the
institution.
Under the proposed rule, the FDIC
would exercise its supervisory
discretion to exempt an institution from
the prepayment requirement if the FDIC
determined that the prepayment would
adversely affect an institution’s safety
and soundness. In addition, an
institution could apply to the FDIC for
an exemption from the prepayment
requirement if the institution could
demonstrate that the prepayment would
significantly impair the institution’s
liquidity, or otherwise create significant
hardship.
III. Comments Received
The FDIC sought comments on every
aspect of the proposed rule, with six
particular issues posed. The FDIC
received more than 800 comments on
the proposed rule, of which
approximately 680 were form letters.
The comments are discussed in section
V below.
IV. Final Rule
In this rulemaking, the FDIC seeks to
address its upcoming liquidity needs by
amending its assessment regulations to
require insured institutions to prepay,
on December 30, 2009, their estimated
quarterly regular risk-based assessments
for the fourth quarter of 2009, and for
all of 2010, 2011, and 2012.
Legal Authority
The FDIC’s assessment authorities are
set forth in section 7 of the Federal
Deposit Insurance Act (FDI Act), 12
U.S.C. 1817(b) and (c).6 Generally, the
FDIC Board of Directors must establish,
by regulation, a risk-based assessment
system for insured depository
institutions. 12 U.S.C. 1817(b)(1)(A).7
Each insured depository institution is
required to pay its risk-based
assessment to the Corporation in such
manner and at such time or times as the
Board of Directors prescribes by
regulation. 12 U.S.C. 1817(c)(2)(B).
In addition, section 7(b)(5) of the FDI
Act, governing special assessments,
empowers the Corporation to impose
one or more special assessments on
insured depository institutions in an
amount determined by the Corporation
for any purpose that the Corporation
may deem necessary. 12 U.S.C.
1817(b)(5). The FDIC exercised this
authority earlier this year when it
promulgated a regulation imposing a
special assessment on June 30, 2009, of
5 basis points of an institution’s total
assets minus its Tier 1 capital as of that
date, not to exceed 10 basis points of the
institution’s risk-based assessment base
as of that date.8 Pursuant to that
rulemaking, the FDIC’s Board of
Directors may impose up to two
additional special assessments, each at
up to the same rate, at the end of the
third and fourth quarters of 2009,
without the need for additional notice-
and-comment rulemaking.
Instead of imposing any additional
special assessments while the industry
is in a weakened condition, the FDIC is
relying on its section 7 authorities to
require insured institutions to prepay
their estimated regular quarterly risk-
based assessments for the fourth quarter
of 2009, and for all of 2010, 2011, and
2012 (the ‘‘prepayment period’’).
Calculation of Estimated Prepaid
Assessment Amount
For purposes of estimating an
institution’s assessments for the
prepayment period and calculating the
VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 E:\FR\FM\17NOR1.SGM 17NOR1
jlentini on DSKJ8SOYB1PROD with RULES